I n t h I s c h a p t e r y o u w I l L

medium of exchange
—an item that
buyers give to sellers when they
want to purchase goods and 
services 
menu costs
—the costs of changing
prices 
microeconomics
—the study of how
households and firms make deci-
sions and how they interact in 
markets 
model of aggregate demand and 
aggregate supply
—the model that
most economists use to explain
short-run fluctuations in economic
activity around its long-run trend 
monetary neutrality
—the proposition
that changes in the money supply
do not affect real variables 
monetary policy
—the setting of the
money supply by policymakers in
the central bank 
money
—the set of assets in an econ-
omy that people regularly use to
buy goods and services from other
people 
money multiplier
—the amount of
money the banking system gener-
ates with each dollar of reserves 
money supply
—the quantity of money
available in the economy 
monopolistic competition
—a market
structure in which many firms sell
products that are similar but not
identical 
monopoly
—a firm that is the sole
seller of a product without close
substitutes 
multiplier effect
—the additional shifts
in aggregate demand that result
when expansionary fiscal policy 
increases income and thereby in-
creases consumer spending 
mutual fund
—an institution that sells
shares to the public and uses the
proceeds to buy a portfolio of stocks
and bonds 
Nash equilibrium
—a situation in
which economic actors interacting
with one another each choose their
best strategy given the strategies
that all the other actors have chosen